Kroger Adopts Corporate Governance Best Practices; Board Backs Annual Elections
CINCINNATI -- A new set of corporate governance enhancements were approved by The Kroger Co.'s board of directors here.
The board also voted to recommend shareholders approve the declassification of the board in tandem with the elimination of cumulative voting at its annual meeting in June 2006.
If shareholders approve the board's proposals, then directors with terms expiring in 2006 and subsequent years will be elected to one-year terms so that by 2008, all directors will be elected annually.
The board also recommended other related items, including that shareholders approve the elimination of the 75 percent supermajority requirement necessary to engage in certain transactions with shareholders owning 10 percent or more of the company's shares. In addition, the board voted to opt out of the Ohio control share acquisition statute, which requires shareholder approval of proposed acquisitions of 20 percent or more of the voting power of the company.
"These important enhancements reflect Kroger's commitment to upholding the highest standards of corporate governance as best practices continue to evolve," said David B. Dillon, Kroger chairman and c.e.o.
Kroger's board also adopted several other changes to the corporate governance guidelines, including: a "poison pill" that will allow the company's warrant dividend plan to expire March 19, 2006 and; a new executive severance policy that requires shareholder approval for any new severance arrangements with senior executives that would exceed 2.99 times average annual W-2 earnings over the prior five years. The limits would apply to any severance arrangement, regardless of any change-in-control provision.
A new policy was also adopted by Kroger's board that requires any director in an uncontested election who receives more "withheld" votes than "for" votes to tender his or her resignation. The corporate governance committee or the remainder of the board will be required to act on that resignation within 90 days.
Kroger's board also has asked the corporate governance committee to study and recommend to the full board adoption of a policy requiring officers and directors to maintain certain levels of stock ownership.
The full text of Kroger's corporate governance guidelines, including the most recent changes, can be found at http://www.thekrogerco.com/documents/GuidelinesIssues.pdf.
The board also voted to recommend shareholders approve the declassification of the board in tandem with the elimination of cumulative voting at its annual meeting in June 2006.
If shareholders approve the board's proposals, then directors with terms expiring in 2006 and subsequent years will be elected to one-year terms so that by 2008, all directors will be elected annually.
The board also recommended other related items, including that shareholders approve the elimination of the 75 percent supermajority requirement necessary to engage in certain transactions with shareholders owning 10 percent or more of the company's shares. In addition, the board voted to opt out of the Ohio control share acquisition statute, which requires shareholder approval of proposed acquisitions of 20 percent or more of the voting power of the company.
"These important enhancements reflect Kroger's commitment to upholding the highest standards of corporate governance as best practices continue to evolve," said David B. Dillon, Kroger chairman and c.e.o.
Kroger's board also adopted several other changes to the corporate governance guidelines, including: a "poison pill" that will allow the company's warrant dividend plan to expire March 19, 2006 and; a new executive severance policy that requires shareholder approval for any new severance arrangements with senior executives that would exceed 2.99 times average annual W-2 earnings over the prior five years. The limits would apply to any severance arrangement, regardless of any change-in-control provision.
A new policy was also adopted by Kroger's board that requires any director in an uncontested election who receives more "withheld" votes than "for" votes to tender his or her resignation. The corporate governance committee or the remainder of the board will be required to act on that resignation within 90 days.
Kroger's board also has asked the corporate governance committee to study and recommend to the full board adoption of a policy requiring officers and directors to maintain certain levels of stock ownership.
The full text of Kroger's corporate governance guidelines, including the most recent changes, can be found at http://www.thekrogerco.com/documents/GuidelinesIssues.pdf.